Banco de Madrid Files for Bankruptcy Protection

MADRID — Banco de Madrid, a small Spanish bank, filed for bankruptcy protection on Monday after a United States government report last week accused its parent company in Andorra of laundering money on behalf of organized crime groups in China and Russia, as well as for government officials in Venezuela.

The bankruptcy filing was aimed at stopping the flight of deposits from the bank after the accusations against its parent, Banca Privada d’Andorra, known as BPA. The Andorran bank was labeled “a primary money laundering concern” in the report by the Financial Crimes Enforcement Network, a unit of the United States Treasury Department.

BPA is one of five banks in Andorra, a small, mountainous country between France and Spain that has thrived as a banking center. BPA, which is family controlled, has about 1.8 billion euros, or nearly $1.9 billion, in assets and has operations in Spain, Luxembourg, Switzerland and Uruguay.

The Andorran authorities took over management of BPA last week after the Treasury report. Accusations in the report have threatened not only the stability of Andorra’s financial sector but also the reputation of the country itself, which was removed in 2009 from a list of “uncooperative tax havens” identified by the Organization for Economic Cooperation and Development.

Joan Pau Miquel Prats, the chief executive of BPA, was arrested by the Andorran authorities on Friday.

BPA’s takeover of Banco de Madrid in 2011 made it the first Andorran bank to have a Spanish banking license. Banco de Madrid said on Monday that it filed for protection from creditors because of the withdrawal of funds by clients after the money laundering investigation was announced.

The Andorran authorities on Monday set a limit on cash withdrawals by clients at €2,500 a week per account.

Another subsidiary of BPA, based in Panama, was seized by the Panamanian authorities last week.

United States investigators contend that several senior executives of BPA abetted money laundering through worldwide networks. One network was “well-connected to Venezuelan government officials and relied on various methods to move funds, including false contracts, mischaracterized loans, over-and under-invoicing, and other trade-based money laundering schemes,” according to the Treasury report.

The report says BPA gained access to the United States financial system through correspondent accounts held at four American banks, which the released summary of the report did not identify. From around 2009 through 2014, BPA processed “hundreds of millions of dollars” through those United States accounts, according to the Treasury report.

Among those named in the Treasury report are Andrey Petrov, who has been accused of bribing officials in Spain on behalf of Russian crime gangs, and Gao Ping, a businessman who has been linked to another Spanish bribery scandal involving shell companies set up in China.

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